Virtual data rooms (VDRS): the next step in document confidentiality and security

For any business, no matter what industry it belongs to, its data is its most important asset. With the world moving more and more towards digitalization, every business is worrying about securing its most important asset, its data. With hackers, malwares, viruses and other threats out there, data security is something that should never be taken lightly. This is where virtual data rooms (VDRs) come into play.

What are Virtual Data Rooms

As the name suggests, a virtual data room or “VDR”, as it’s normally called, is an online database where companies can store and share their most confidential information with ease, usually during a financial transaction. Think of it as an online document filing system.

VDRs are used by companies to safely and securely access their critical data and share it among each other as well as with authorized outsiders during deals.

Companies use VDRs to store confidential information like financial, legal and tax matters as well as documents relating to intellectual property, trade secrets, copyrighted works, etc.

VDRs first came into existence in the financial industry but they were quickly adopted by other industries once their benefits came to be known. They became a must-have for all businesses that share confidential and sensitive information online like lawyers, financial corporations, etc. These businesses need to know that their data cannot be accessed by anyone from the outside. VDRs boasted this security. VDRs allow the company or entrepreneur or an individual to focus on their work, their assets, their customers and leave the online data security to VDRs.

Why are VDRs used?

VDRs are fast becoming the norm for financial transactions, rapidly replacing the old methods of physical data rooms. Physical data rooms were time consuming, inconvenient and had other limitations. With the field of online security growing in leaps and bounds, physical data rooms quickly became obsolete and started being replaced by VDRs. Now companies can share due diligence information, which is highly confidential, securely and conveniently from anywhere in the world.

Where are they used?

M&A Due Diligence

One of the most popular uses of VDRs is Merger and Acquisitions (M&A) due diligence. VDRs allow businesses to conduct entire deals online. During due diligence, tons of confidential data is exchanged, so all the parties involved need to be sure that their information is safe and secure and that their assets are being safeguarded. They key players in the deal are sharing and collaborating on highly sensitive information. Rather than gathering in one place to review the documents and sign them, partners in the deal can do that remotely from wherever they are. All the information being shared is encrypted and completely controlled with user permission features.

Fundraising

Whether you have a small business or a large enterprise, fundraising is a key concept of growing your business. But this can be a hectic task as fundraising requires sharing of a big deal of sensitive data, especially during the due diligence investigation. Using a VDR during the fundraising process can facilitate all the parties involved with the exchange of confidential information and its security. The management of both sides can rest assured as VDRs give them more control and insight into who should be authorized to access what information and for how long.

Conclusion

Bottom line is that VDRs can be beneficial for all people who need to share confidential files and data among themselves, HR departments that need to maintain employee records, project managers who are in charge of looking over entire projects, and other unlimited scenarios. The benefits of VDRs cannot be overlooked anymore.

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